Brazilian issuers sold BRL20.3 billion ($3.9 billion) worth of infrastructure debentures in the first half of the year, more than twice as much as BRL9.9 billion in the same period last year, according to figures from the Economy Ministry.
The number of transactions, meanwhile, jumped to 59 in the first six months of 2021 from 18 in the same timeframe last year.
In June alone, issuers printed BRL5.5 billion in infrastructure debentures, more than double the BRL2.7 billion in the same month last year.
“Companies have understood it can be a valuable and competitive source of financing. They have issued long-term debentures, which are widely used by infrastructure companies,” Claudio Frischtak, founder and managing partner of local consulting firm Inter.B, told LatinFinance.
The majority of proceeds – 55% – went to energy projects in the first half of the year, followed by transport with 25%, telecommunications with 13% and water and wastewater with 7%, according to the Economy Ministry.
The debentures paid an average rate equal to the IPCA consumer price index plus 5.4% in the first six months of the year, up from IPCA plus 5.2% in the same period of 2020.
The so-called “debêntures incentivadas” are tax free for foreign investors and local retail investors and charge a cut-rate 15% for local corporate investors. They have attracted BRL141 billion in investments since they were introduced in 2012 with 27% from retail investors and 3.9% from foreign investors, according to the Economy Ministry.
In addition, the sale of green infrastructure debentures climbed to BRL2.6 billion in the first half of the year, compared to BRL880 million in the same period last year.
“There has been a boom in green bond issues since last year,” Julia Ambrosano, Latin America analyst at Climate Bonds Initiative (CBI), told LatinFinance, adding that a new fast-track regulatory framework and investor demand for environmental, social and governance (ESG) bonds have stimulated the market.
Frischtak said Brazil currently invests the equivalent of 1.7% of GDP in infrastructure project, but it would need to spend some 4% of GDP to meet demand. He said the shortfall amounts to BRL190 billion per year.